Record 13% Pay Hike For Civil Servants – Get Ready For Subsidy Cuts, Skyrocketing Inflation And Even Recession

Record 13% Pay Hike For Civil Servants – Get Ready For Subsidy Cuts, Skyrocketing Inflation And Even Recession


May 7th, 2024 by financetwitter



In a desperate effort to buy votes, especially from fellow Malay Muslims of whom 80% did not vote for Anwar Ibrahim in the last November 2022 General Election, the Malaysian Prime Minister announced a record hike in civil servants’ salary of more than 13%. He bragged on Labour Day that the RM10 billion allocations is the “best pay increase in history”.



Effective December this year, the salary hike means civil servants earning a minimum income of RM1,795 will get a boost to RM2,000 per month. Besides self-praising, Mr Anwar, who is also finance minister, hopes that the pay increase announcement would not only increase his plunging popularity, but would also fix pressure on household budgets due to depreciation of the Ringgit.



Having lost almost 4% of its value against the US dollar so far this year, Anwar-led Unity Government has been using foreign reserves to support the Ringgit ever since the currency dropped to 4.7965 against the greenback in February – a 26-year low since the 1997-98 Asian Financial Crisis. Unable to fix the stubbornly weak currency, he decided to hike salary instead to offset the problem.



Refused to admit his incompetence, the prime minister was in denial when he described the Ringgit’s plunge as “under control” despite the fact that it was the worst currency in Asia last year after the Japanese Yen. Over the first three quarters of 2023, the trade balance declined by 20.5% year-on-year. In spite of cheap Ringgit, exports suffered an even harder decline than imports.



The pay hike for the 1.71-million bloated civil servants – 90% of whom are Bumiputeras or Malays – will cost the government some RM10 billion annually in taxpayers’ money. Even before the increase, the emoluments are estimated to be RM95.64 billion this year – equivalent to 31.5% of the government’s total operating expenditure (OPEX). And we have not even talked about RM1.5 trillion in national debts.



Crucially, just to be popular, Anwar is putting a heavier pension burden on the government with the civil servants’ pay hikes. Did he realise that the new emoluments – RM105.64 billion – will push up the total public expenditure to almost 27% of the RM393.8 billion allocated for the Budget 2024? Perhaps he should explain whether we should worry about the RM1.5 trillion national debts.



To bulldoze the pay hike, he argues that the civil servants have sacrificed tremendously, especially the police, army, fire-fighters, anti-corruption agency, customs and whatnot. He has even challenged lawmakers to block his proposal. While MPs would not dare reject for fear of losing future elections, PM Anwar’s proposal was not only irresponsible, but was ill-conceived.



Every Tom, Dick and Harry knows that not every civil servant deserves a salary adjustment. For example, the police and customs – arguably two of the most corrupted institutions – generally do not need the pay hike. They have a very well established profit-making business within their “organization” to ensure dirty money is distributed, from lowest ranking officers to the top minister.



The immigration department conducted a total of 2,528 operations from Jan 1 to Feb 23 this year alone, arresting 14,361 undocumented migrants during these raids. Why do you think the authority was so hardworking? That’s largely because it’s a goldmine. When the migrants are arrested, they would be detained for 14 days to solve their documentation problems.



While being detained, each migrant would be asked to pay between RM7,000 to RM10,000 to engage “job agencies” parked under the Immigration Department to fix work permits and other issues. Hence, the 14,361 undocumented migrants translate to between RM100 million to RM140 million “goldmine” industry within the immigration department.



Previously, Tourism, Arts and Culture Minister Tiong King Sing had to rush to the Kuala Lumpur International Airport (KLIA) to help a traveller from China detained by the corrupt Immigration Department trying to solicit RM18,000 in bribes. Hilariously, after being caught with its pants down, the immigration officers told the minister that the matter was a misunderstanding due to language barrier.



It was both disturbing and embarrassing to the Anwar administration when the minister said the corruption episode at the KLIA was the “fifth time” he had intervened in similar cases. The scandal was so explosive that even Anwar had made a surprise visit. But as expected, no dirty officer has been arrested, let alone charged and jailed because the PM could not afford to offend the powerful department.



Likewise, the Royal Malaysia Police, infamous for dirty cops, has already put in place a foolproof system to ensure every officer benefits from ill-gotten money collected every month. So, they too don’t need the salary hike. Former Prime Minister Mahathir Mohamad once joked that if every corrupt police officer is arrested, there would be no police left in the country.




After 18 months, Anwar’s rhetoric to crack down on corruption should be taken with a pinch of salt. He dares not make a move on police or customs because the Malay civil servants translate to hundreds of thousands of votes, which he desperately needs. Heck, the man did not even have the balls to reject crooked Najib Razak’s demand for a royal pardon, with “jail from home” coming soon.



The Malaysian Anti-Corruption Commission (MACC) Chief, Azam Baki, has just admitted that Malaysia lost about RM277 billion to corruption over the past 5 years (2018-2023). And it’s not rocket science that some civil servants were working hand-in-glove with crooks and politicians to plunder the national coffers, but got away as the corruption was conveniently blamed on inefficiency and leakages.



To be fair, not all government departments or agencies are corrupted. Malaysian healthcare workers like nurses are overworked, underpaid and under-appreciated. It would make more sense to increase nurse’ salary by 26% than to reward corrupt police or custom officers with 13% hike. Even when civil servants were not involved in corruption, not everyone deserves the pay hike.



Government workers are also known for being lazy, rude, arrogant and inefficient. After being criticized for blindly reward every civil servant, Mr Anwar said the government is considering freezing pay rise for slow and lazy employees. But the clueless premier again shows his ignorance when he claims that only 5% of the civil servants will be affected, guaranteeing 95% with pay raise.



The prime minister must have mistaken Malaysia with Singapore over his hilarious upside-down data. It’s more believable that only 5% of government servants are productive whilst the rest of 95% are mostly sleeping on the job. Either they spend more time playing phone than working during office hours, or would disappear elsewhere for extraordinary lengthy coffee break.



Even in Singapore, worker productivity was at 60%, whilst South Korea hit 72%. If 95% Malaysian government workers deserve the pay hike because they were productive as claimed, it means either PM Anwar was lying through his teeth because all he wanted was their votes, or his standard of productivity was measured against third world countries such as Afghanistan.



There’s a third reason – civil servants pretended to be busy when Anwar made a so-called surprise visit, just like how everyone knew prior to his KLIA visit during the scandal involving immigration officers soliciting RM18,000 in bribes from a Chinese traveller. If indeed productivity is 95% as fantasized, Malaysia’s GDP per capital will be higher than Singapore’s US$82,800, and not remained at merely US$12,000.



The real reason the salary increase is being bulldozed has nothing to do with civil servants productivity at all. But it has everything to do with the government’s plan to cut subsidies. When neighbouring Singapore leaked about Anwar’s Madani government plan to cut fuel subsidies by June after the Kuala Kubu Baharu by-election on May 11, the PM went ballistic.



Interestingly, as he slammed news media over the report, he did not deny the existence of such plan. He merely said his administration has not decided yet. Regardless of the method fuel subsidy is slashed, you can bet your last Ringgit that inflation will skyrocket. None of the past prime ministers, from clueless Abdullah Badawi to genius Najib Razak, had cut the subsidy without sparking high inflation.



In addition to the RM10 billion of “pay hike” hot money pumped into the market, which will itself increase inflation, the higher fuel price as a result of subsidy cut will have a direct impact on inflation. Fuel prices determine the daily transportation and logistic costs. Therefore, when fuel expenses for businesses increase, product and service costs will also rise, which will then be passed on to consumers.



In the same breath, the rise in transportation and logistics costs can elevate the consumer price index and reduce households’ purchasing power. As higher fuel prices affect consumer spending, economic growth will eventually slow and lead to recession. Because fuel is a significant expense for many businesses, particularly those in transportation, logistics, and manufacturing sectors, higher fuel price will affect profit margins.



And when profitability is reduced, business may have no choice but to retrench workers just to stay afloat. This can lead to higher unemployment rates or salary stagnation. Like it or not, the subsidy cut will definitely burden the people, no matter how the prime minister twists and spins. Annual fuel subsidies, amounting to more than RM50 billion, eat up the bulk of Malaysia’s today subsidy of RM80 billion.



That’s why the Central Database Hub (Padu) was introduced to collect information from the people. The government has planned to roll out a targeted subsidy programme for RON95 petrol. Sure, a free float of fuel prices in Malaysia may save the government RM29 billion, but it will also cost RM29 billion to consumers. Giving RM10 billion to civil servants, only to take away RM29 billion from the public is a recipe for disaster.